SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
Mark One:
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarter ended June 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-27324
SYNAPTIC PHARMACEUTICAL CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 22-2859704
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
215 College Road
Paramus, NJ 07652
(Address of principal executive offices) (Zip Code)
(201) 261-1331
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
As of July 29, 1998, there were 10,698,819 shares of the registrant's Common
Stock outstanding.
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SYNAPTIC PHARMACEUTICAL CORPORATION
INDEX TO QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 1998
PART I. FINANCIAL INFORMATION
Page
----
Item 1. Financial Statements 1
Balance Sheets at June 30, 1998 and December 31, 1997 1
Statements of Operations and Comprehensive Income (Loss) for
the three months ended June 30, 1998 and 1997, and for the
six months ended June 30, 1998 and 1997 2
Statements of Cash Flows for the six months ended
June 30, 1998 and 1997 3
Notes to Financial Statements 4
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 5
PART II. OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds 8
Item 4. Submission of Matters to a Vote of Security Holders 9
Item 5. Other Information 10
Item 6. Exhibits and Reports on Form 8-K 11
Signatures 12
(i)
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
SYNAPTIC PHARMACEUTICAL CORPORATION
BALANCE SHEETS
(in thousands, except share information)
ASSETS
June 30, December 31,
1998 1997
---------- -----------
(Unaudited) (Audited)
Current assets:
Cash and cash equivalents $13,448 $23,113
Restricted cash 600 600
Marketable securities--current maturities 7,747 10,010
Revenue receivable under collaborative agreement 160 40
Other current assets 1,158 674
------- -------
Total current assets 23,113 34,437
Property and equipment, net 4,962 4,682
Marketable securities 40,309 28,977
Patent and patent application costs,
net of accumulated amortization 1,132 1,306
------- -------
$69,516 $69,402
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 606 $ 811
Accrued liabilities 560 547
Accrued compensation 240 340
Unearned revenue under research agreement 313 --
------- -------
Total current liabilities 1,719 1,698
Stockholders' equity:
Preferred Stock, $.01 par value; authorized--
1,000,000 shares; issued--none -- --
Common Stock, $.01 par value; authorized--
25,000,000 shares; issued and outstanding--
10,698,207 shares in 1998 and 10,526,585 shares
in 1997; 107 105
Additional paid-in capital 98,401 97,049
Deferred compensation (99) (160)
Accumulated deficit (30,662) (29,316)
Accumulated other comprehensive income--
net unrealized gains on securities 50 26
------- -------
Total stockholders' equity 67,797 67,704
------- -------
$69,516 $69,402
======= =======
See notes to financial statements.
1
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SYNAPTIC PHARMACEUTICAL CORPORATION
STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(in thousands, except share and per share information)
(Unaudited)
For the three months For the six months
ended June 30, ended June 30,
1998 1997 1998 1997
------- ------- ------- -------
Revenues:
Contract revenue $ 2,148 $ 2,755 $ 4,313 $ 5,310
License revenue -- -- 2,000 --
Grant revenue 60 102 150 242
------- ------- ------- -------
Total revenues 2,208 2,857 6,463 5,552
Expenses:
Research and development 3,851 3,343 7,512 6,691
General and administrative 1,085 957 2,168 1,922
------- ------- ------- -------
Total expenses 4,936 4,300 9,680 8,613
------- ------- ------- -------
Loss from operations (2,728) (1,443) (3,217) (3,061)
Other income, net:
Interest income 953 485 1,871 970
Interest expense -- (1) -- (4)
------- ------- ------- -------
Other income, net 953 484 1,871 966
------- ------- ------- -------
Net loss $(1,775) $ (959) $(1,346) $(2,095)
======= ======= ======= =======
Comprehensive loss:
Net loss $(1,775) $ (959) $(1,346) $(2,095)
Other comprehensive
income (loss)--unrealized
holding gains (losses)
arising during period 121 (163) 24 6
------- ------- ------- -------
Comprehensive loss $(1,654) $(1,122) $(1,322) $(2,089)
======= ======= ======= =======
Basic and diluted net loss
per share $(0.17) $(0.13) $(0.13) $(0.27)
====== ====== ====== ======
Shares used in
computation of basic
and diluted net loss
per share 10,691,744 7,646,085 10,668,641 7,640,454
========== ========= ========== =========
See notes to financial statements.
2
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SYNAPTIC PHARMACEUTICAL CORPORATION
STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
For the six months
ended June 30,
1998 1997
------- -------
Operating activities:
Net loss $(1,346) $(2,095)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 702 584
Amortization of premiums/(discounts) on securities 74 (72)
Amortization of deferred compensation 41 65
Changes in operating assets and liabilities:
Increase in other current assets (484) (130)
Decrease in accounts payable, accrued liabilities
and accrued compensation (291) (317)
Increase in collaborative agreement
revenue receivable (120) --
Increase in deferred revenue 313 --
------- -------
Net cash used in operating activities (1,111) (1,965)
Investing activities:
Sale or maturity of investments 30,000 10,350
Purchase of investments (39,120) (3,943)
Purchases of property and equipment (808) (1,661)
------- -------
Net cash (used in) provided by investing activities (9,928) 4,746
Financing activities:
Issuance of common stock, net of repurchases 1,374 23
Payments on capital lease -- (61)
------- -------
Net cash provided by (used in) financing activities 1,374 (38)
------- -------
Net (decrease) increase in cash and cash equivalents (9,665) 2,743
Cash and cash equivalents at beginning of period 23,113 4,589
------- -------
Cash and cash equivalents at end of period $13,448 $ 7,332
======= =======
See notes to financial statements.
3
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SYNAPTIC PHARMACEUTICAL CORPORATION
NOTES TO FINANCIAL STATEMENTS
June 30, 1998
Note 1 -- Basis of Presentation
The accompanying unaudited financial statements have been prepared in
accordance with the instructions to Form 10-Q and may not include all
information and footnotes required for a presentation in accordance with
generally accepted accounting principles. In the opinion of the management of
Synaptic Pharmaceutical Corporation (the "Company"), these financial statements
include all normal and recurring adjustments necessary for a fair presentation
of the financial position and the results of operations and cash flows of the
Company for the interim periods presented. For more complete financial
information, these financial statements should be read in conjunction with the
audited financial statements for the fiscal year ended December 31, 1997, and
notes thereto included in the Company's 1997 Annual Report on Form 10-K. The
results of operations for the fiscal quarter ended June 30, 1998, are not
necessarily indicative of the results of operations to be expected for the full
year.
Note 2 -- New Accounting Standard
In June 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 130, "Reporting Comprehensive Income."
This pronouncement, which was required to be adopted effective January 1, 1998,
requires the presentation of a statement of comprehensive income. Comprehensive
income (loss) is defined as the change in equity of a business enterprise during
a period resulting from transactions and other events and circumstances from
nonowner sources. Comprehensive loss for the Company, in addition to net loss,
includes unrealized gains and losses on marketable securities held for sale,
currently recorded in stockholders' equity.
4
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Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Overview
Synaptic Pharmaceutical Corporation is a biotechnology company engaged
in the development of a broad platform of enabling technology which it calls
"human receptor-targeted drug design technology." It is utilizing this
technology both to discover and clone the genes that code for human receptor
subtypes associated with specific disorders and to design compounds that can
potentially be developed as drugs for treating these disorders. The Company is
currently engaged in collaborations with four pharmaceutical companies: Eli
Lilly and Company ("Lilly"), Merck & Co., Inc. ("Merck"), The Warner-Lambert
Company ("Warner-Lambert") and Grunenthal GmbH ("Grunenthal"). In connection
with these collaborations, the Company has granted to these companies licenses
under certain patent rights and to certain technology. The Company had been
engaged in a collaboration with Novartis Pharma AG ("Novartis") and had granted
to Novartis a license under certain patent rights and to certain technology. On
August 3, 1998, the collaboration and related research funding support provided
by Novartis ended in accordance with the terms of the Company's agreements with
Novartis. Novartis continues to have a license under certain patent rights and
to certain technology of the Company. The Company has also granted a license
under certain patent rights, as well as an option to obtain an additional
license under certain patent rights, to Glaxo Group Limited ("Glaxo"). Since
inception, the Company has financed its operations primarily through the sale of
stock, through funds provided by its collaborative partners Lilly and Merck and
former collaborative partner Novartis under their agreements with the Company,
through funds provided by its licensee, Glaxo, under a license agreement and
through interest income and capital gains resulting from its investments. The
Company also receives revenues from government grants under the Small Business
Innovative Research ("SBIR") program of the National Institutes of Health.
Under its collaborative and license agreements, the Company may receive
one or more of the following types of revenue: contract revenue, license
revenue, royalty revenue or revenue from the sales of drugs. Contract revenue
includes research funding to support a specified number of the Company's
scientists and payments upon the achievement of specified research and
development milestones. Research funding revenue is recognized ratably over the
period of the agreement to which it relates and is based upon predetermined
funding requirements. Research and development milestone payment revenue is
recognized when the related research or development milestone is achieved.
License revenue represents non-refundable payments for a license to one or more
of the Company's patents and/or a license to the Company's technology.
Non-refundable payments for licenses are recognized at such time as they are
received or, if earlier, become guaranteed. Under its agreements with Lilly,
Merck, Warner-Lambert, Glaxo and Novartis, the Company is entitled to receive
royalty payments based upon the sales of drugs that may be developed using the
Company's technology. Under its agreement with Grunenthal, the Company has
development and marketing rights in certain territories with respect to drugs,
if any, that are jointly identified as part of the collaboration. Accordingly,
the Company may receive revenue from sales in its territories (as defined) of
such drugs if it markets them independently or the Company may receive royalty
payments if it licenses its marketing rights to a third party. To date, the
Company has not received either royalty revenue or revenue from the sales of
drugs and the Company does not expect to receive such revenues for a number of
years, if at all.
To date, the Company's expenditures have been for research and
development related expenses, general and administrative related expenses, fixed
asset purchases and various patent related expenditures incurred in protecting
the Company's technologies. The Company has been historically unprofitable and
had an accumulated deficit of $30,662,000 at June 30, 1998. The Company expects
to continue to incur operating losses for a number of years and may not become
profitable, if at all, unless and until it receives royalty revenue or revenue
from sales of drugs that may be developed with the use of its technology or its
patent rights.
Results of Operations
Comparison of the Three Months Ended June 30, 1998 and 1997
Revenues. The Company recognized revenue of $2,208,000 and $2,857,000
for the three months ended June 30, 1998 and 1997, respectively. The decrease of
$649,000 was attributable primarily to a net decrease in contract revenue of
$607,000 which is primarily due to the reduction in full-time equivalent
scientists being funded under one of the Company's collaborative arrangements.
Research and Development Expenses. The Company incurred research
and development expenses of $3,851,000, and $3,343,000 for the three months
ended June 30, 1998 and 1997, respectively. The increase of $508,000, or 15%,
in research and
5
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development expenses was attributable primarily to: an increase of $246,000 in
compensation and fringe benefit expenses resulting from a net average headcount
increase of 6 research personnel as well as annual salary increases for the
scientific staff; and an increase of $131,000 in facility related costs.
General and Administrative Expenses. The Company incurred general and
administrative expenses of $1,085,000 and $957,000 for the three months ended
June 30, 1998 and 1997, respectively. The increase of $128,000, or 13%, was
attributable primarily to: an increase of $48,000 in compensation expenses
resulting from a net average headcount increase as well as annual salary and
bonus increases for the administrative staff; an increase of $161,000 in patent
costs, which includes one-time charges associated with resisting a third party
opposition to the issuance to the Company of a foreign patent, all of which were
offset by a decrease of $89,000 in legal costs. The additional $89,000 in legal
costs reported for the second quarter of 1997 was primarily attributable to
negotiations relating to a new collaboration.
Other Income, Net. The Company recorded other income of $953,000 and
$484,000 for the three months ended June 30, 1998 and 1997, respectively. The
increase of $469,000 was primarily due to higher interest income as a result of
higher cash, cash equivalent and marketable securities balances during 1998
which resulted from the receipt of net proceeds from a public offering of its
common stock completed in November 1997.
Net Loss and Basic and Diluted Net Loss Per Share. The net loss
incurred by the Company was $1,775,000 ($0.17 per share), and $959,000 ($0.13
per share) for the three months ended June 30, 1998 and 1997, respectively. The
increase in net loss per share of $0.04 resulted primarily from the decrease in
revenues and increase in expenses as described above.
Comparison of the Six Months Ended June 30, 1998 and 1997
Revenues. The Company recognized revenue of $6,463,000 and $5,552,000
for the six months ended June 30, 1998 and 1997, respectively. The increase of
$911,000 was attributable primarily to an increase in license revenue of
$2,000,000. This increase in license revenue was offset by a net decrease in
contract revenue of $997,000 which is primarily due to the reduction in
full-time equivalents scientists being funded under one of the Company's
collaborative arrangements.
Research and Development Expenses. The Company incurred research and
development expenses of $7,512,000, and $6,691,000 for the six months ended June
30, 1998 and 1997, respectively. The increase of $821,000, or 12%, in research
and development expenses was attributable primarily to: an increase of $474,000
in compensation and fringe benefit expenses resulting from a net average
headcount increase of 9 research personnel as well as annual salary increases
for the scientific staff; and an increase of $150,000 in facility related costs.
General and Administrative Expenses. The Company incurred general and
administrative expenses of $2,168,000 and $1,922,000 for the six months ended
June 30, 1998 and 1997, respectively. The increase of $246,000, or 13%, was
attributable primarily to: an increase of $105,000 in compensation expense
resulting from a net average headcount increase as well as annual salary and
bonus increases for the administrative staff; an increase of $176,000 in patent
costs, which includes one-time charges associated with resisting a third party
opposition to the issuance to the Company of a foreign patent, all of which were
offset by a decrease of $86,000 in legal costs. The additional $86,000 in legal
costs reported for the first half of 1997 was primarily attributable to
negotiations relating to a new collaboration.
Other Income, Net. The Company recorded other income of $1,871,000 and
$966,000 for the six months ended June 30, 1998 and 1997, respectively. The
increase of $905,000 was primarily due to higher interest income as a result of
higher cash, cash equivalent and marketable securities balances during 1998
which resulted from the receipt of net proceeds from a public offering of its
common stock completed in November 1997.
Net Loss and Basic and Diluted Net Loss Per Share. The net loss
incurred by the Company was $1,346,000 ($0.13 per share), and $2,095,000 ($0.27
per share) for the three months ended June 30, 1998 and 1997, respectively. The
decrease in net loss per share of $0.14 resulted primarily from higher license
revenue and higher interest income offset by higher expenses as described above.
The Company does not believe that inflation has had a material impact
on its results of operations.
6
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Liquidity and Capital Resources
At June 30, 1998 and December 31, 1997, cash, cash equivalents and
marketable securities aggregated $61,504,000 and $62,100,000, respectively. The
$61,504,000 of cash, cash equivalents and marketable securities includes
$313,000 of research funding received in advance from Novartis for research to
be performed during the third quarter. In addition to the cash, cash equivalents
and marketable securities described above, the Company had $600,000 in
restricted cash recorded in its balance sheet at June 30, 1998. This restricted
cash secures lease payments to the Company's landlord for one full year.
To date, the Company has met its cash requirements through the sale of
its stock, through contract and license revenue, through SBIR grants and through
interest income and gains resulting from its investments. As of June 30, 1998,
the Company had received: $97,700,000 from the sale of its stock; $57,000,000 in
licensing fees, research funding and milestone payments under its collaborative
and license agreements; $3,500,000 in SBIR grants; and $8,100,000 in other
income, net. To date, the portion of these funds that has been expended by the
Company has been used principally to fund research and development, to purchase
fixed assets used primarily in its research activities, to create its patent
estate and to pay general and administrative support costs.
During the period from January 1, 1998 through June 30, 1998, the
Company received research funding under three of its collaborative arrangements.
During the period from July 1, 1998 through December 31, 1998, the Company
expects to receive $2,700,000 in the aggregate under two of its collaborations.
Research funding under the Lilly collaboration is scheduled to expire on
December 31, 1998. Research funding under the Merck collaboration is scheduled
to expire on November 30, 1998 but Merck has the right to terminate the
collaboration and such funding earlier by giving 90 days' prior written notice.
Research funding under the Novartis collaboration ended on August 3, 1998 in
accordance with the terms of the underlying agreements.
At June 30, 1998, the Company had invested an aggregate of $9,255,000
in property and equipment. The Company leases laboratory and office facilities
under an agreement expiring on December 31, 2015. The minimum annual payment
under the lease is currently $674,000.
At June 30, 1998 the Company had $61,504,000 in cash, cash equivalents
and marketable securities. The Company intends to utilize these funds primarily
to conduct its current and future research programs, for patent related
expenditures, for general corporate purposes and to make leasehold improvements
to its facilities beyond the level which existed on June 30, 1998. The Company
expects to continue to incur operating losses for a number of years and will
require the use of cash to finance its capital programs. The Company believes
that its cash on hand, together with the funds that it expects to receive from
its collaborative partners and interest income will be sufficient to fund: an
increased operating expense level; the Company's portion of its shared costs of
certain development activities under its collaboration with Grunenthal; and an
increased level of capital spending through the year 2000.
This Report on Form 10-Q contains "forward looking statements" within
the meaning of Section 27A of the Securities Act of 1933, and Section 21E of the
Securities Exchange Act of 1934. Such statements include, but are not limited
to, those relating to future cash and spending plans, amounts of future research
funding, and any other statements regarding future growth, future cash needs,
future operations, business plans and financial results, and any other
statements which are not historical facts. When used in this document, the words
"expect," "may," "believes," and similar expressions are intended to be among
the words that identify forward looking statements. Such statements involve
risks and uncertainties, including, but not limited to, those risks and
uncertainties detailed under the captions "Patents, Proprietary Technology and
Trade Secrets," "Competition" and "Government Regulation" in the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 1997 (the
"1997 Form 10-K") as well as those risks and uncertainties disclosed under the
captions "Early Stage of Product Development; Technological Uncertainty,"
"Dependence on Collaborative Partners and Licensees for Development, Regulatory
Approvals, Manufacturing, Marketing and Other Resources" and "Uncertainties
Related to Clinical Trials" as "Cautionary Statements" in the 1997 Form 10-K or
detailed from time to time in filings the Company makes with the SEC. Should one
or more of these risks or uncertainties materialize, or should underlying
assumptions prove incorrect, actual outcomes may vary from those indicated.
Although the Company believes that the expectations reflected in the forward
looking statements contained herein are reasonable, it can give no assurance
that such expectations will prove to be correct. The Company expressly disclaims
any obligation or undertaking to disseminate any updates or revisions to any
forward looking statement contained herein to reflect any change in the
Company's expectations with regard thereto or any change in events, conditions
or circumstances on which any such statement is based.
7
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PART II. OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds
Securities Act Rule 229.463 ("Rule 463") required issuers to report on
Form SR their use of proceeds, following an initial public offering, within ten
days of the first three months following the effective date of the registration
statement, and every six months thereafter, until the application of all such
proceeds was complete. Effective September 2, 1997, pursuant to Release No.
34-38850, the Securities and Exchange Commission ("SEC") amended Rule 463 to
eliminate Form SR and now requires a first-time registrant to report the
application of proceeds in each of its periodic reports filed pursuant to the
requirements under the Exchange Act until the application of such proceeds is
complete. Prior to September 2, 1997, the Company utilized Form SR to report the
application of proceeds received by the Company following its initial public
offering.
The information provided below represents a reasonable estimate of the
cumulative application, through June 30, 1998, of the net proceeds of
$25,194,000 which were received following the Company's initial public offering
on December 13, 1995:
Construction of plant, building and facilities $ 425,000
Purchase and installation of machinery and equipment $ 3,918,000
Working capital used to fund operations $18,235,000
Except for payments described in the following sentence, the cumulative
application of the net offering proceeds listed above represents direct payments
to others. No payments were made to directors or officers or to their associates
except for payments made in the ordinary course of business which include, but
may not be limited to, the payment of officer salaries, fringe benefits, and
expense reimbursements or compensation paid to directors for their attendance at
board meetings or for their services provided to the Company under consulting
arrangements, if any.
At June 30, 1998, the status of proceeds pending final application are
as follows:
Temporary investment of proceeds in marketable securities $ 2,616,000
8
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Item 4. Submission of Matters to a Vote of Security Holders
On May 12, 1998, the Company held its annual meeting of stockholders
for the following purposes: (i) to elect three Class II directors to the Board
of Directors (Proposal No. 1); (ii) to amend the Company's 1996 Incentive Plan
in order to increase the number of shares of Common Stock available for award
under such Plan and to bring the Plan into compliance with Section 162(m) of the
Internal Revenue Code of 1986, as amended (Proposal No. 2); and (iii) to ratify
the appointment by the Board of Directors of Ernst & Young LLP as the
independent auditors of the Company for the fiscal year ending December 31, 1998
(Proposal No.
3).
The stockholders elected the persons named below, the Company's
nominees for director, as Class II directors of the Company, casting votes for
such nominees or withholding votes as indicated:
VOTES FOR VOTES WITHHELD
Jonathan J. Fleming 7,906,914 338,092
Eric R. Kandel 7,906,914 338,092
John E. Lyons 7,906,914 338,092
The stockholders approved Proposal No. 2 as follows:
VOTES FOR VOTES AGAINST VOTES ABSTAINED BROKER NON-VOTES
3,771,233 2,117,995 6,120 2,349,658
The stockholders approved Proposal No. 3 as follows:
VOTES FOR VOTES AGAINST VOTES ABSTAINED BROKER NON-VOTES
8,241,906 2,300 800 0
9
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Item 5. Other Information
The Company, in collaboration with Lilly, is currently conducting drug
discovery programs focused on a number of serotonin receptor subtypes and
therapeutic applications. With respect to the drug discovery program focused on
the identification and development of serotonin 2B antagonists for the
prophylactic treatment of migraine, Lilly selected a compound for possible
development and conducted late preclinical testing of the compound. However,
Lilly recently determined that, as a result of competing priorities, it would
not continue to develop this compound and would instead seek a licensee or
development partner for the compound. Lilly's determination with respect to the
migraine prophylaxis program does not affect the acute migraine program which
Lilly is conducting in collaboration with the Company. The acute migraine
program is focused on the development of a serotonin 1F-selective agonist for
the treatment of acute migraine. Lilly is currently conducting Phase II clinical
trials with a compound that is the subject of this program.
On August 3, 1998, the term of the Company's collaboration with
Novartis, which was focused principally on the identification and development of
neuropeptide Y drugs for the treatment of obesity and eating disorders, as well
as cardiovascular disorders, expired in accordance with the terms of the
Research and License Agreement dated as of August 4, 1994, as amended, and the
Research and License Agreement dated as of May 31, 1996. In connection with the
expiration of the collaboration, Novartis' obligation to provide the Company
with funding to support a specified number of the Company's scientists
terminated. Novartis continues to have a license under certain patent rights and
to certain technology of the Company pursuant to the terms of the Research and
License Agreements.
The Company, in collaboration with Warner-Lambert, is currently
conducting drug discovery programs focused on a number of galanin receptor
subtypes and therapeutic applications. As part of the collaboration, the Company
and Warner-Lambert have identified small molecule compounds that are selective
for certain of the galanin receptor subtypes.
For a general description of Phase II clinical trials, the early and
late preclinical stages of testing and other stages of drug discovery and
development, see the Company's 1997 Form 10-K.
10
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Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit
No. Description
- ------- -----------
10.1 Incentive Stock Option Agreement dated as of May 12, 1998, between
the Company and Theresa A. Branchek (filed herewith)
10.2 Nonqualified Stock Option Agreement dated as of May 12, 1998,
between the Company and Theresa A. Branchek (filed herewith)
27 Financial Data Schedule
(b) Reports on Form 8-K
The Company did not file any Current Reports on Form 8-K during the fiscal
quarter ended June 30, 1998.
11
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SIGNATURE PAGE
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
SYNAPTIC PHARMACEUTICAL CORPORATION
(Registrant)
Date: August 7, 1998 By:/s/ Kathleen P. Mullinix
-----------------------------
Name: Kathleen P. Mullinix
Title: Chairman, President &
Chief Executive Officer
By:/s/ Robert L. Spence
-----------------------------
Name: Robert L. Spence
Title: Senior Vice President,
Chief Financial Officer &
Treasurer
12
EXHIBIT 10.1
------------
NONTRANSFERABLE
INCENTIVE STOCK OPTION AGREEMENT
THIS AGREEMENT, dated as of the 12th day of May, 1998, is by
and between SYNAPTIC PHARMACEUTICAL CORPORATION, a Delaware corporation (the
"Company"), and Theresa A. Branchek (the "Optionee," which term as used herein
shall be deemed to include any successor to the Optionee by will or by the laws
of descent and distribution, unless the context shall otherwise require).
W I T N E S S E T H:
WHEREAS, the Company and the Optionee are parties to an
Employment Agreement dated as of April 1, 1998 (as the same may be amended from
time to time, the "Employment Agreement");
WHEREAS, pursuant to the Synaptic Pharmaceutical Corporation
1996 Incentive Plan (the "Plan"), the Company, acting through the Compensation
Committee (the "Committee") of its Board of Directors (the "Board"), on May 12,
1998 (the "Start Date"), granted to the Optionee options to purchase up to an
aggregate of 25,000 shares of Common Stock, $0.01 par value, of the Company (the
"Common Stock"), at the price of $14.4375 per share, one of such options
covering 10,827 shares of Common Stock to be for the term and upon the terms and
conditions hereinafter stated and the other of such options covering 14,173
shares of Common Stock to be for the term and upon the terms and conditions set
forth in the Nontransferable Nonqualified Stock Option Agreement of even date
herewith;
WHEREAS, the Company's intention is to have the two options
granted on the Start Date generally become exercisable with respect to 25% of
the total number of shares of Common Stock covered by both such options each
year during a four-year period; and
WHEREAS, due to certain tax limitations, the option agreements
covering such options do not individually provide for four-year ratable vesting,
although such agreements do, when considered together, so provide for such
vesting.
NOW, THEREFORE, in consideration of the mutual premises and
undertakings hereinafter set forth, the parties hereto agree as follows:
1. Option; Option Price. Pursuant to said action of the
Committee, the Company has granted to the Optionee the option (the "Option") to
purchase, upon and subject to the terms and conditions of this Agreement and the
terms and conditions of the Plan (which are hereby incorporated by reference
herein), 10,827 shares (the "Option Shares") of Common Stock of the Company at
the price of $14.4375 per share (the "Option Price"), which Option is intended
to qualify for Federal income tax purposes as an "incentive stock option" within
the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the
"Code").
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2. Term. The term (the "Option Term") of the Option shall
commence on the Start Date and expire on the tenth anniversary of the Start
Date, unless the Option shall theretofore have been terminated in accordance
with the terms hereof or of the Plan.
3. Exercisability; Time of Exercise.
(a) General. Unless accelerated in the discretion of the
Committee or as otherwise provided herein, the Option shall become exercisable
as to 1,280 of the Option Shares on April 1, 1999, as to an additional 1,399 of
the Option Shares on April 1, 2000, as to an additional 2,256 of the Option
Shares on April 1, 2001, and as to an additional 5,892 of the Option Shares on
April 1, 2002; provided, however, that if the Optionee dies or retires with the
consent of the Company any time prior to April 1, 2002, then the Option shall be
exercisable as to that number of Option Shares which is equal to the sum of (i)
the total number of Option Shares, if any, as to which the Option had become
exercisable through the 1st day of April immediately preceding the date of death
or retirement (the "Preceding April 1st") and (ii) that number which is equal to
the product of (A) the number of additional Option Shares as to which the Option
would have become exercisable during the 12-month period commencing on the day
following the Preceding April 1st and ending on the first April 1st immediately
following such date of death or retirement had such death or retirement not
occurred and (B) 1/12 times the number of full calendar months which shall have
elapsed during the period commencing on the Preceding April 1st and ending on
the date of the Optionee's death or retirement; provided further, however, that
if, at any time prior to April 1, 2002, the Optionee's employment with the
Company is terminated in contemplation of, or at any time within one (1) year
following, a Change in Control (capitalized terms used and not defined herein
having the meanings ascribed to them in the Employment Agreement) and such
termination constitutes a Termination Without Cause or a Resignation for Good
Reason, then the Option shall, as of the date of such termination, become
exercisable in full as to all of the Option Shares. The Option shall remain
exercisable as to all of such shares until the expiration of the Option Term,
unless it is terminated earlier as provided in any of the other paragraphs of
this Section 3 or Section 6 or as provided in the Plan.
(b) Termination for Cause. If the Optionee shall cease to be
an employee of the Company as a result of a termination by the Company for
Cause, the Option shall automatically terminate on, and the Optionee shall have
no further right to exercise the Option on or after, the date as of which notice
of such termination is given to the Optionee by the Company.
(c) Termination without Cause. If the Optionee's employment
with the Company terminates for any reason other than Cause or the Optionee's
death or Disability or Retirement (as defined in the Plan), the Option shall
thereafter be exercisable only to the extent of the purchase rights, if any,
which shall have accrued pursuant to paragraph (a) of this Section 3 as of the
date of such termination, and the Option and such accrued rights to purchase
shall in any event terminate upon, and the Optionee shall have no further right
to exercise the Option after, the earlier of (i) the expiration of the Option
Term and (ii) (A) in the case of any such termination governed by Section 11 of
the Employment Agreement, 120 days after the date of such termination and (B) in
the case
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<PAGE>
of any such termination not governed by said Section 11, 90 days after the date
of such termination; provided, however, that, in the case of any such
termination other than a termination resulting from the Optionee being
"disabled" within the meaning of Section 22(e)(3) of the Code, the Option shall
no longer be treated as an "incentive stock option" within the meaning of
Section 422 of the Code unless exercised within three (3) months following the
date of such termination.
(d) Termination as a Result of Disability or Retirement. If
the Optionee's employment with the Company terminates as a result of the
Optionee's Disability or Retirement, the Option shall thereafter be exercisable
only to the extent of the purchase rights, if any, which shall have accrued
pursuant to paragraph (a) of this Section 3 as of the date of such termination,
and the Option and such accrued rights to purchase shall in any event terminate
upon, and the Optionee shall have no further right to exercise the Option after,
the earlier of (i) the expiration of the Option Term and (ii) 180 days after the
date of such termination; provided, however, that, in the case of any such
termination other than a termination resulting from the Optionee being
"disabled" within the meaning of Section 22(e)(3) of the Code, the Option shall
no longer be treated as an "incentive stock option" within the meaning of
Section 422 of the Code unless exercised within three (3) months following the
date of such termination.
(e) Termination as a Result of Death. If the Optionee's
employment with the Company terminates as a result of the Optionee's death, the
Option shall thereafter be exercisable by the Optionee's Designated Beneficiary
(as defined in the Plan) or personal representatives, heirs or legatees (as
provided in the Plan), but only to the extent of the purchase rights, if any,
which shall have accrued pursuant to paragraph (a) of this Section 3 as of the
date of such termination, and the Option and such accrued rights to purchase
shall in any event terminate upon, and the Optionee shall have no further right
to exercise the Option after, the earlier of (i) the expiration of the Option
Term and (ii) one (1) year after the date of death. Notwithstanding anything
contained in the Plan to the contrary, the Option shall continue to be treated
as an "incentive stock option" within the meaning of Section 422 of the Code
even if it is not exercised until after the third month following the date of
the Optionee's death.
(f) Death Following Disability or Retirement. In the event of
the Optionee's death within 180 days following the Optionee's termination of
employment as a result of the Optionee's Disability or Retirement, the Option
shall thereafter be exercisable by the Optionee's Designated Beneficiary or
personal representatives, heirs or legatees, to the extent of the purchase
rights, if any, which shall have accrued pursuant to paragraph (a) of this
Section 3 as of the date of such termination, for a period of one (1) year
following the date of death but in no event later than the expiration of the
Option Term; provided, however, that, in the case in which the Optionee's
termination of employment resulted from the Optionee being "disabled" within the
meaning of Section 22(e)(3) of the Code, the Option shall no longer be treated
as an "incentive stock option" within the meaning of Section 422 of the Code
unless exercised within one (1) year following the date of such termination; and
provided further, however, that, in all other cases, the Option shall no longer
be treated as an "incentive stock option" within the meaning of Section 422 of
the Code unless exercised within three (3) months following the date of such
termination.
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<PAGE>
4. Procedure for Exercise. (a) The Option may be exercised,
from time to time, in whole or in part (but for the purchase of whole shares
only), by delivery of a written notice (the "Notice") from the Optionee to the
Secretary of the Company, which Notice shall:
(i) state that the Optionee elects to exercise the
Option under this Agreement;
(ii) state the number of shares with respect to which
the Optionee is exercising the Option (the "Acquired Shares");
(iii) include any representations of the Optionee
required under Section 7(b) hereof;
(iv) state the method of payment for the Acquired
Shares pursuant to Section 4(b);
(v) in the event that the Option shall be exercised
by any person other than the Optionee pursuant to Sections 3
and 8, include appropriate proof of the right of such person
to exercise the Option; and
(vi) state the date upon which the Optionee desires
to consummate the purchase of the Acquired Shares (which date
must be prior to the termination of such Option).
(b) Payment of the Option Price for the Acquired Shares shall,
unless otherwise provided by the Committee, be made in cash or by personal or
certified check.
5. No Rights as a Stockholder. The Optionee shall not have any
privileges of a stockholder with respect to any Option Shares until the date of
a stock certificate representing such Option Shares is issued to the Optionee.
6. Adjustments.
(a) Stock Dividends, Splits, Subdivisions or Combinations.
Subject to the other provisions of this Section 6, if, at any time while the
Option is outstanding, the Common Stock is changed by reason of dividends
payable in Common Stock or splits, subdivisions or combinations of shares of
Common Stock, then the number of shares of Common Stock deliverable upon the
exercise thereafter of the Option shall be increased or decreased
proportionately, as the case may be, without change in the aggregate Option
Price.
(b) Cash Mergers. Upon the occurrence of a merger on
consolidation of the Company with another corporation in a transaction in which
the stockholders of the Company receive cash consideration in exchange for their
shares of capital stock of the Company (a "cash
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merger"), the Option shall automatically terminate; provided, however, that the
Optionee shall be given (i) written notice of such cash merger at least 20 days
prior to its proposed effective date (as specified in such notice) and (ii) an
opportunity, during the period commencing with delivery of such notice and
ending ten (10) days prior to such proposed effective date, to exercise the
Option in full as to all of the Option Shares, whether or not then vested.
(c) Assumption or Substitution of Options. Notwithstanding
anything contained herein or in the Plan to the contrary, Section 6(b) shall not
be applicable if provision shall be made in connection with such cash merger for
the assumption of the Option by, or the substitution for the Option of a new
option covering the stock of, the surviving, successor or purchasing
corporation, or a parent or subsidiary thereof, with appropriate adjustments as
to the number, kind and option price of shares subject to such option; provided,
however, that the Board shall, to the extent not inconsistent with the best
interests of the Company or its subsidiaries (such best interests to be
determined in good faith by the Board, in its sole discretion), use its best
efforts to ensure that any such assumption or substitution will not constitute a
modification, extension or renewal of the Option within the meaning of Section
424(h) of the Code and the regulations thereunder.
(d) Corporate Transactions. Notwithstanding anything contained
herein or in the Plan to the contrary, upon the occurrence of (i) a merger or
consolidation of the Company with another corporation in a transaction (other
than a cash merger) in which the Company shall not survive or in which the
Company is the survivor but its capital stock is exchanged for stock,
securities, or property of another entity or (ii) a sale of all or substantially
all of the assets of the Company (any transaction described in clause (i) or
(ii) being referred to herein as a "corporate transaction"), provision shall be
made in connection with such corporate transaction for the assumption of the
Option by, or the substitution for the Option of a new option covering the stock
of, the surviving, successor or purchasing corporation, or a parent or
subsidiary thereof, with appropriate adjustments as to the number, kind and
option price of shares subject to such option; provided, however, that the Board
shall, to the extent not inconsistent with the best interests of the Company or
its subsidiaries (such best interests to be determined in good faith by the
Board, in its sole discretion), use its best efforts to ensure that any such
assumption or substitution will not constitute a modification, extension or
renewal of the Option within the meaning of Section 424(h) of the Code and the
regulations thereunder.
(e) Termination within One Year of Cash Merger or Corporate
Transaction. Notwithstanding anything contained herein or in the Plan to the
contrary, in the event the Optionee's employment with the Company or the person
which is the surviving, successor or purchasing corporation in a cash merger to
which Section 6(c) applies or a corporate transaction to which Section 6(d)
applies, or a parent or subsidiary thereof, is terminated without Cause and
other than as a result of the Optionee's death or disability, at any time prior
to the first anniversary of such transaction or merger, the Option shall become
exercisable in full as to all Option Shares, whether or not vested, as of the
date on which notice of termination is given to the Optionee, and the Optionee
shall have the right to exercise the Option as to any or all of such shares
until the earlier
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<PAGE>
of (i) the expiration of the Option Term and (ii) the 90th day following the
date of such termination, at which time the Option shall terminate.
7. Additional Provisions Related to Exercise. (a) The Option
shall be exercisable only on such date or dates and during such period and for
such number of shares of Common Stock as are set forth in this Agreement.
(b) To exercise the Option, the Optionee shall follow the
procedures set forth in Section 4 hereof. Upon the exercise of the Option at a
time when there is not in effect a registration statement under the Securities
Act of 1933, as amended, relating to the shares of Common Stock issuable upon
exercise of the Option, the Optionee shall provide the Company with such
representations and warranties as may be required by the Committee to the effect
that the Acquired Shares are being acquired for investment and not with a view
to the distribution thereof. Anything contained herein to the contrary
notwithstanding, in the event the Board shall determine, in its sole and
subjective discretion, that the registration, qualification or listing of the
Option Shares upon a securities exchange or under any state or Federal law, or
the consent or approval or any government or regulatory body, is necessary or
desirable as a condition of or in connection with the exercise of the Option,
the Option may not be exercised, in whole or in part, unless and until such
registration, qualification, listing, consent or approval shall have been
effected or obtained free of any conditions not acceptable to the Board.
(c) The Option shall not be affected by any change of duties
or position of the Optionee (including transfer to or from a subsidiary), so
long as the Optionee continues to be an employee of the Company or one of its
subsidiaries. Nothing in the Option granted hereunder shall confer upon the
Optionee any right to continue in the employ of the Company or any of its
subsidiaries or interfere in any way with the right of the Company or its
subsidiaries or the stockholders of the Company, as the case may be, to
terminate the Optionee's employment or to increase or decrease the Optionee's
compensation at any time.
8. Restriction on Transfer. The Option may not be transferred,
pledged, assigned, hypothecated (whether by operation of law or otherwise), sold
or otherwise disposed of in any way by the Optionee, except by will or by the
laws of descent and distribution, and may be exercised during the lifetime of
the Optionee only by the Optionee. If the Optionee dies, the Option shall
thereafter be exercisable, during the applicable period specified in Section 3,
by the Optionee's Designated Beneficiary or personal representatives, heirs or
legatees (as provided in the Plan) to the full extent to which the Option was
exercisable by the Optionee at the time of the Optionee's death as provided
herein. The Option shall not be subject to execution, attachment or similar
process. Any attempted transfer, pledge, assignment, hypothecation, sale or
other disposition of the Option contrary to the provisions hereof, and the levy
of any execution, attachment or similar process upon the Option, shall be null
and void and without effect.
9. Restrictive Legends. In order to reflect certain
restrictions on disposition of the shares acquired upon exercise of the Option
(the "Restricted Shares"), all stock certificates
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representing the Restricted Shares issued shall have affixed thereto any legends
determined by the Company to be appropriate.
10. Notices. All notices or other communications which are
required or permitted hereunder shall be in writing and sufficient if (i)
personally delivered or sent by telecopier, (ii) sent by nationally-recognized
overnight courier or (iii) sent by registered or certified mail, postage
prepaid, return receipt requested, addressed as follows:
if to the Optionee, to:
Theresa A. Branchek
518 Standish Road
Teaneck, New Jersey 07666
if to the Corporation, to:
Synaptic Pharmaceutical Corporation
215 College Road
Paramus, New Jersey 07652
Attention: President
Telecopier: 201-261-0623
or to such other address as the party to whom notice is to be given may have
furnished to each other party in writing in accordance herewith. Any such
communication shall be deemed to have been given (i) when delivered, if
personally delivered, sent by telecopier or sent by nationally-recognized
overnight courier and (ii) on the third Business Day (as hereinafter defined)
following the date on which the piece of mail containing such communication is
posted, if sent by mail. As used herein, "Business Day" means a day that is not
a Saturday, Sunday or a day on which banking institutions in the city to which
the notice or communication is to be sent are not required to be open.
11. No Waiver. No waiver of any breach or condition of this
Agreement shall be deemed to be a waiver of any other or subsequent breach or
condition, whether of like or different nature.
12. Optionee Undertaking. The Optionee hereby agrees to take
whatever additional actions and execute whatever additional documents the
Company may in its reasonable judgement deem necessary or advisable in order to
carry out or effect one or more of the obligations or restrictions imposed on
the Optionee pursuant to the express provisions of this Agreement.
13. Modification of Rights. The rights of the Optionee are
subject to modification and termination in certain events as provided in this
Agreement and the Plan.
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14. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New Jersey without giving
effect to principles of conflicts of laws.
15. Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed to be an original, but all of
which together shall constitute one and the same instrument.
16. Entire Agreement. This Agreement, the Employment
Agreement(the provisions relating to stock options of which are hereby
incorporated herein by reference) and the Plan constitute the entire agreement
between the parties with respect to the subject matter hereof and thereof, and
supersede all previously written or oral negotiations, commitments,
representations and agreements with respect thereto. In the event of any
inconsistency among the terms of this Agreement, the terms of the Employment
Agreement and the terms of the Plan, the terms of the Employment Agreement shall
control.
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IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first written above.
SYNAPTIC PHARMACEUTICAL CORPORATION
By:/s/ Kathleen P. Mullinix
-----------------------------------------------
Kathleen P. Mullinix
Chairman, President and Chief Executive Officer
/s/ Theresa A. Branchek
-----------------------------------------------
Theresa A. Branchek
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EXHIBIT 10.2
------------
NONTRANSFERABLE
NONQUALIFIED STOCK OPTION AGREEMENT
THIS AGREEMENT, dated as of the 12th day of May, 1998, is by
and between SYNAPTIC PHARMACEUTICAL CORPORATION, a Delaware corporation (the
"Company"), and Theresa A. Branchek (the "Optionee," which term as used herein
shall be deemed to include any successor to the Optionee by will or by the laws
of descent and distribution, unless the context shall otherwise require).
W I T N E S S E T H:
WHEREAS, the Company and the Optionee are parties to an
Employment Agreement dated as of April 1, 1998 (as the same may be amended from
time to time, the "Employment Agreement");
WHEREAS, pursuant to the Synaptic Pharmaceutical Corporation
1996 Incentive Plan (the "Plan"), the Company, acting through the Compensation
Committee (the "Committee") of its Board of Directors (the "Board"), on May 12,
1998 (the "Start Date"), granted to the Optionee options to purchase up to an
aggregate of 25,000 shares of Common Stock, $0.01 par value, of the Company (the
"Common Stock"), at the price of $14.4375 per share, one of such options
covering 14,173 shares of Common Stock to be for the term and upon the terms and
conditions hereinafter stated and the other of such options covering 10,827
shares of Common Stock to be for the term and upon the terms and conditions set
forth in the Nontransferable Incentive Stock Option Agreement of even date
herewith;
WHEREAS, the Company's intention is to have the two options
granted on the Start Date generally become exercisable with respect to 25% of
the total number of shares of Common Stock covered by both such options each
year during a four-year period; and
WHEREAS, due to certain tax limitations, the option agreements
covering such options do not individually provide for four-year ratable vesting,
although such agreements do, when considered together, so provide for such
vesting.
NOW, THEREFORE, in consideration of the mutual premises and
undertakings hereinafter set forth, the parties hereto agree as follows:
1. Option; Option Price. Pursuant to said action of the
Committee, the Company has granted to the Optionee the option (the "Option") to
purchase, upon and subject to the terms and conditions of this Agreement and the
terms and conditions of the Plan (which are hereby incorporated by reference
herein), 14,173 shares (the "Option Shares") of Common Stock of the Company at
the price of $14.4375 per share (the "Option Price"), which Option is not
intended to qualify for Federal income tax purposes as an "incentive stock
option" within the meaning of Section 422 of the Internal Revenue Code of 1986,
as amended (the "Code").
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2. Term. The term (the "Option Term") of the Option shall
commence on the Start Date and expire on the tenth anniversary of the Start
Date, unless the Option shall theretofore have been terminated in accordance
with the terms hereof or of the Plan.
3. Exercisability; Time of Exercise.
(a) General. Unless accelerated in the discretion of the
Committee or as otherwise provided herein, the Option shall become exercisable
as to 4,970 of the Option Shares on April 1, 1999, as to an additional 4,851 of
the Option Shares on April 1, 2000, as to an additional 3,994 of the Option
Shares on April 1, 2001, and as to an additional 358 of the Option Shares on
April 1, 2002; provided, however, that if the Optionee dies or retires with the
consent of the Company any time prior to April 1, 2002, then the Option shall be
exercisable as to that number of Option Shares which is equal to the sum of (i)
the total number of Option Shares, if any, as to which the Option had become
exercisable through the 1st day of April immediately preceding the date of death
or retirement (the "Preceding April 1st") and (ii) that number which is equal to
the product of (A) the number of additional Option Shares as to which the Option
would have become exercisable during the 12-month period commencing on the day
following the Preceding April 1st and ending on the first April 1st immediately
following such date of death or retirement had such death or retirement not
occurred and (B) 1/12 times the number of full calendar months which shall have
elapsed during the period commencing on the Preceding April 1st and ending on
the date of the Optionee's death or retirement; provided further, however, that
if, at any time prior to April 1, 2002, the Optionee's employment with the
Company is terminated in contemplation of, or at any time within one (1) year
following, a Change in Control (capitalized terms used and not defined herein
having the meanings ascribed to them in the Employment Agreement) and such
termination constitutes a Termination Without Cause or a Resignation for Good
Reason, then the Option shall, as of the date of such termination, become
exercisable in full as to all of the Option Shares. The Option shall remain
exercisable as to all of such shares until the expiration of the Option Term,
unless it is terminated earlier as provided in any of the other paragraphs of
this Section 3 or Section 6 or as provided in the Plan.
(b) Termination for Cause. If the Optionee shall cease to be
an employee of the Company as a result of a termination by the Company for
Cause, the Option shall automatically terminate on, and the Optionee shall have
no further right to exercise the Option on or after, the date as of which notice
of such termination is given to the Optionee by the Company.
(c) Termination without Cause. If the Optionee's employment
with the Company terminates for any reason other than Cause or the Optionee's
death or Disability or Retirement (as defined in the Plan), the Option shall
thereafter be exercisable only to the extent of the purchase rights, if any,
which shall have accrued pursuant to paragraph (a) of this Section 3 as of the
date of such termination, and the Option and such accrued rights to purchase
shall in any event terminate upon, and the Optionee shall have no further right
to exercise the Option after, the earlier of (i) the expiration of the Option
Term and (ii) (A) in the case of any such termination governed by Section
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11 of the Employment Agreement, 120 days after the date of such termination and
(B) in the case of any such termination not governed by said Section 11, 90 days
after the date of such termination.
(d) Termination as a Result of Disability or Retirement. If
the Optionee's employment with the Company terminates as a result of the
Optionee's Disability or Retirement, the Option shall thereafter be exercisable
only to the extent of the purchase rights, if any, which shall have accrued
pursuant to paragraph (a) of this Section 3 as of the date of such termination,
and the Option and such accrued rights to purchase shall in any event terminate
upon, and the Optionee shall have no further right to exercise the Option after,
the earlier of (i) the expiration of the Option Term and (ii) 180 days after the
date of such termination.
(e) Termination as a Result of Death. If the Optionee's
employment with the Company terminates as a result of the Optionee's death, the
Option shall thereafter be exercisable by the Optionee's Designated Beneficiary
(as defined in the Plan) or personal representatives, heirs or legatees (as
provided in the Plan), but only to the extent of the purchase rights, if any,
which shall have accrued pursuant to paragraph (a) of this Section 3 as of the
date of such termination, and the Option and such accrued rights to purchase
shall in any event terminate upon, and the Optionee shall have no further right
to exercise the Option after, the earlier of (i) the expiration of the Option
Term and (ii) one (1) year after the date of death.
(f) Death Following Disability or Retirement. In the event of
the Optionee's death within 180 days following the Optionee's termination of
employment as a result of the Optionee's Disability or Retirement, the Option
shall thereafter be exercisable by the Optionee's Designated Beneficiary or
personal representatives, heirs or legatees, to the extent of the purchase
rights, if any, which shall have accrued pursuant to paragraph (a) of this
Section 3 as of the date of such termination, for a period of one (1) year
following the date of death but in no event later than the expiration of the
Option Term.
4. Procedure for Exercise. (a) The Option may be exercised,
from time to time, in whole or in part (but for the purchase of whole shares
only), by delivery of a written notice (the "Notice") from the Optionee to the
Secretary of the Company, which Notice shall:
(i) state that the Optionee elects to exercise the
Option under this Agreement;
(ii) state the number of shares with respect to which
the Optionee is exercising the Option (the "Acquired Shares");
(iii) include any representations of the Optionee
required under Section 7(b) hereof;
(iv) state the method of payment for the Acquired
Shares pursuant to Section 4(b);
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(v) in the event that the Option shall be exercised
by any person other than the Optionee pursuant to Sections 3
and 8, include appropriate proof of the right of such person
to exercise the Option; and
(vi) state the date upon which the Optionee desires
to consummate the purchase of the Acquired Shares (which date
must be prior to the termination of such Option).
(b) Payment of the Option Price for the Acquired Shares shall,
unless otherwise provided by the Committee, be made in cash or by personal or
certified check.
5. No Rights as a Stockholder. The Optionee shall not have any
privileges of a stockholder with respect to any Option Shares until the date of
a stock certificate representing such Option Shares is issued to the Optionee.
6. Adjustments.
(a) Stock Dividends, Splits, Subdivisions or Combinations.
Subject to the other provisions of this Section 6, if, at any time while the
Option is outstanding, the Common Stock is changed by reason of dividends
payable in Common Stock or splits, subdivisions or combinations of shares of
Common Stock, then the number of shares of Common Stock deliverable upon the
exercise thereafter of the Option shall be increased or decreased
proportionately, as the case may be, without change in the aggregate Option
Price.
(b) Cash Mergers. Upon the occurrence of a merger on
consolidation of the Company with another corporation in a transaction in which
the stockholders of the Company receive cash consideration in exchange for their
shares of capital stock of the Company (a "cash merger"), the Option shall
automatically terminate; provided, however, that the Optionee shall be given (i)
written notice of such cash merger at least 20 days prior to its proposed
effective date (as specified in such notice) and (ii) an opportunity, during the
period commencing with delivery of such notice and ending ten (10) days prior to
such proposed effective date, to exercise the Option in full as to all of the
Option Shares, whether or not then vested.
(c) Assumption or Substitution of Options. Notwithstanding
anything contained herein or in the Plan to the contrary, Section 6(b) shall not
be applicable if provision shall be made in connection with such cash merger for
the assumption of the Option by, or the substitution for the Option of a new
option covering the stock of, the surviving, successor or purchasing
corporation, or a parent or subsidiary thereof, with appropriate adjustments as
to the number, kind and option price of shares subject to such option.
(d) Corporate Transactions. Notwithstanding anything contained
herein or in the Plan to the contrary, upon the occurrence of (i) a merger or
consolidation of the Company with another corporation in a transaction (other
than a cash merger) in which the Company shall not
-4-
<PAGE>
survive or in which the Company is the survivor but its capital stock is
exchanged for stock, securities, or property of another entity or (ii) a sale of
all or substantially all of the assets of the Company (any transaction described
in clause (i) or (ii) being referred to herein as a "corporate transaction"),
provision shall be made in connection with such corporate transaction for the
assumption of the Option by, or the substitution for the Option of a new option
covering the stock of, the surviving, successor or purchasing corporation, or a
parent or subsidiary thereof, with appropriate adjustments as to the number,
kind and option price of shares subject to such option.
(e) Termination within One Year of Cash Merger or Corporate
Transaction. Notwithstanding anything contained herein or in the Plan to the
contrary, in the event the Optionee's employment with the Company or the person
which is the surviving, successor or purchasing corporation in a cash merger to
which Section 6(c) applies or a corporate transaction to which Section 6(d)
applies, or a parent or subsidiary thereof, is terminated without Cause and
other than as a result of the Optionee's death or disability, at any time prior
to the first anniversary of such transaction or merger, the Option shall become
exercisable in full as to all Option Shares, whether or not vested, as of the
date on which notice of termination is given to the Optionee, and the Optionee
shall have the right to exercise the Option as to any or all of such shares
until the earlier of (i) the expiration of the Option Term and (ii) the 90th day
following the date of such termination, at which time the Option shall
terminate.
7. Additional Provisions Related to Exercise. (a) The Option
shall be exercisable only on such date or dates and during such period and for
such number of shares of Common Stock as are set forth in this Agreement.
(b) To exercise the Option, the Optionee shall follow the
procedures set forth in Section 4 hereof. Upon the exercise of the Option at a
time when there is not in effect a registration statement under the Securities
Act of 1933, as amended, relating to the shares of Common Stock issuable upon
exercise of the Option, the Optionee shall provide the Company with such
representations and warranties as may be required by the Committee to the effect
that the Acquired Shares are being acquired for investment and not with a view
to the distribution thereof. Anything contained herein to the contrary
notwithstanding, in the event the Board shall determine, in its sole and
subjective discretion, that the registration, qualification or listing of the
Option Shares upon a securities exchange or under any state or Federal law, or
the consent or approval or any government or regulatory body, is necessary or
desirable as a condition of or in connection with the exercise of the Option,
the Option may not be exercised, in whole or in part, unless and until such
registration, qualification, listing, consent or approval shall have been
effected or obtained free of any conditions not acceptable to the Board.
(c) The Option shall not be affected by any change of duties
or position of the Optionee (including transfer to or from a subsidiary), so
long as the Optionee continues to be an employee of the Company or one of its
subsidiaries. Nothing in the Option granted hereunder shall confer upon the
Optionee any right to continue in the employ of the Company or any of its
subsidiaries or interfere in any way with the right of the Company or its
subsidiaries or the
-5-
<PAGE>
stockholders of the Company, as the case may be, to terminate the Optionee's
employment or to increase or decrease the Optionee's compensation at any time.
8. Restriction on Transfer. The Option may not be transferred,
pledged, assigned, hypothecated (whether by operation of law or otherwise), sold
or otherwise disposed of in any way by the Optionee, except by will or by the
laws of descent and distribution, and may be exercised during the lifetime of
the Optionee only by the Optionee. If the Optionee dies, the Option shall
thereafter be exercisable, during the applicable period specified in Section 3,
by the Optionee's Designated Beneficiary or personal representatives, heirs or
legatees (as provided in the Plan) to the full extent to which the Option was
exercisable by the Optionee at the time of the Optionee's death as provided
herein. The Option shall not be subject to execution, attachment or similar
process. Any attempted transfer, pledge, assignment, hypothecation, sale or
other disposition of the Option contrary to the provisions hereof, and the levy
of any execution, attachment or similar process upon the Option, shall be null
and void and without effect.
9. Restrictive Legends. In order to reflect certain
restrictions on disposition of the shares acquired upon exercise of the Option
(the "Restricted Shares"), all stock certificates representing the Restricted
Shares issued shall have affixed thereto any legends determined by the Company
to be appropriate.
10. Notices. All notices or other communications which are
required or permitted hereunder shall be in writing and sufficient if (i)
personally delivered or sent by telecopier, (ii) sent by nationally-recognized
overnight courier or (iii) sent by registered or certified mail, postage
prepaid, return receipt requested, addressed as follows:
if to the Optionee, to:
Theresa A. Branchek
518 Standish Road
Teaneck, New Jersey 07666
if to the Corporation, to:
Synaptic Pharmaceutical Corporation
215 College Road
Paramus, New Jersey 07652
Attention: President
Telecopier: 201-261-0623
or to such other address as the party to whom notice is to be given may have
furnished to each other party in writing in accordance herewith. Any such
communication shall be deemed to have been given (i) when delivered, if
personally delivered, sent by telecopier or sent by nationally-recognized
overnight courier and (ii) on the third Business Day (as hereinafter defined)
following the date on
-6-
<PAGE>
which the piece of mail containing such communication is posted, if sent by
mail. As used herein, "Business Day" means a day that is not a Saturday, Sunday
or a day on which banking institutions in the city to which the notice or
communication is to be sent are not required to be open.
11. No Waiver. No waiver of any breach or condition of this
Agreement shall be deemed to be a waiver of any other or subsequent breach or
condition, whether of like or different nature.
12. Optionee Undertaking. The Optionee hereby agrees to take
whatever additional actions and execute whatever additional documents the
Company may in its reasonable judgement deem necessary or advisable in order to
carry out or effect one or more of the obligations or restrictions imposed on
the Optionee pursuant to the express provisions of this Agreement.
13. Modification of Rights. The rights of the Optionee are
subject to modification and termination in certain events as provided in this
Agreement and the Plan.
14. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New Jersey without giving
effect to principles of conflicts of laws.
15. Counterparts. This Agreement may be executed in one
or more counterparts, each of which shall be deemed to be an original, but all
of which together shall constitute one and the same instrument.
16. Entire Agreement. This Agreement, the Employment
Agreement(the provisions relating to stock options of which are hereby
incorporated herein by reference) and the Plan constitute the entire agreement
between the parties with respect to the subject matter hereof and thereof, and
supersede all previously written or oral negotiations, commitments,
representations and agreements with respect thereto. In the event of any
inconsistency among the terms of this Agreement, the terms of the Employment
Agreement and the terms of the Plan, the terms of the Employment Agreement shall
control.
-7-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first written above.
SYNAPTIC PHARMACEUTICAL CORPORATION
By:/s/Kathleen P. Mullinix
-----------------------------------------------
Kathleen P. Mullinix
Chairman, President and Chief Executive Officer
/s/Theresa A. Branchek
-----------------------------------------------
Theresa A. Branchek
-8-
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 13,448,000
<SECURITIES> 48,056,000
<RECEIVABLES> 160,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 23,113,000
<PP&E> 9,255,000
<DEPRECIATION> 4,293,000
<TOTAL-ASSETS> 69,516,000
<CURRENT-LIABILITIES> 1,719,000
<BONDS> 0
0
0
<COMMON> 107,000
<OTHER-SE> 67,690,000
<TOTAL-LIABILITY-AND-EQUITY> 69,516,000
<SALES> 0
<TOTAL-REVENUES> 6,463,000
<CGS> 0
<TOTAL-COSTS> 9,680,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,346,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,346,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,346,000)
<EPS-PRIMARY> (0.13)
<EPS-DILUTED> (0.13)
</TABLE>
